Energy

February 10, 2009

Many Americans have already taken important steps to make their homes energy efficient while those that are dropping the ball would pick up their slack if financial resources permit, according to a recent national survey conducted by Yale and George Mason University. There’s no surprise: Americans are willing and ready for energy efficiency and pollution reduction, especially if it saves them money in the long-run and improves the quality of their lives.

The most intriguing finding of the survey is that consumers face a natural barrier to going green – the significant upfront financial cost. A reduction in this barrier requires a new set of market instruments, perhaps one where upfront costs are diffused over time like the cost of a cellphone that’s covered via monthly fees (and let’s not forget the government subsidy option either). But assuming this barrier to sustainable consumer behavior is done away with, will the U.S. of A. pollute less? Will CO2 emissions drop to 1990 levels? Probably not.

The consumer wants to reduce emissions demand given the push that’s coming from the new administration, energy prices and declining incomes. But here’s the paradox: an environmentally friendly consumer base reduces a supplier’s pollution level, which creates room for other polluters to “make up” for the reduction and keep national emissions constant. So effectively, nothing really changes.

June 25, 2008

A few weeks ago, my colleague Ed Moed blogged about his hope that troubles in the airline industry would lead to less air traffic and, thus, fewer delays. It appears Ed’s view of the future may be upon us sooner than any of us expected. A group called the Business Travel Coalition, which bills itself as an advocacy organization for companies with large travel budgets, recently issued a report that paints a future for major airlines that is nothing short of cataclysmic. The BTC points out that U.S. airlines are paying twice as much for fuel as they did last year, and four times as much as they did in 2000. They’re having a hard time keeping up with these skyrocketing costs; they simply can’t raise fares fast enough or high enough.

The BTC predicts that as soon as this year, large carriers could soon join ranks of the five U.S.-based airlines that have gone belly up since March: Aloha, ATA, Champion, EOS and Skybus. When ATA shut down, thousands of passengers were stranded. If a major airline goes pear-shaped, the BTC report predicts, hundreds of thousands of passengers could be out of luck on a single day, along with all the companies that depend on it for freight. And with the credit crunch affecting every company’s access to liquidity, an airline may not be able to continue operating through bankruptcy as some have in the past.

Unless the price of oil corrects soon, airline travel will become a luxury for affluent vacationers and C-level executives. And if airlines think that business travelers with mandatory, face-to-face meetings will keep them afloat, they might have to think again. At least three transatlantic business-class airlines have shut down recently: EOS, MAXjet and Silverjet. Even expense accounts in the world’s richest cities (e.g. New York, London, Dubai) could not keep them afloat. Beginning now. companies will have to think hard about the high costs of sending teams of staff to client sites versus using cheaper (and cooler) new technologies like Cisco’s TelePresence. Airlines are making that decision easier than ever. United has already announced plans to bring back minimum-stay requirements for its lowest-fare tickets (on top of laying off 950 pilots). To get the cheapest United ticket from Chicago to Minneapolis, for example, will require a traveler to stay three nights or an entire weekend. Three nights!

It’s only 408 miles from Chicago to Minneapolis. Armed with maps from Adventure Cycling, I could probably ride my bike that far in three nights. Sure United is stuck between a rock and a hard place, but misguided policies like these might not only make flying a luxury the vast majority of Americans and American companies cannot afford, but could also spell the death knell for airline brands we now take for granted.

April 28, 2008

Timing, as they say, is everything. Today Big Oil executives must be patting themselves on the back for their exquisite timing. Over the weekend their full-page ad ran in the New York Times Magazine, trumpeting the fact that millions of everyday Americans own oil stocks through their managed funds, thus record oil company profits are lifting all boats.

Then this morning news hit that labor strikes in the U.K. and Nigeria could shut down 2.5 percent of the world’s oil production. It could be weeks before oil output returns to normal. Crude should hit $120 per barrel any minute now, and I’m sure we’ll see middle-class Americans running through the streets shouting, “We’re rich!”

Big Oil’s latest rising-tide marketing campaign reeks of disingenuousness. The industry cites research by an economic think tank, Sonecon, showing that the tens of millions of Americans who participate in mutual funds, IRAs and personal retirement accounts indirectly own oil stocks through these accounts. So all this condemnation about their “excess profits,” Big Oil says, is completely misplaced.

Balderdash. First, While many socially responsible funds are not game-breakers, the problem is that most Americans fail to educate themselves about the possibilities of even basic socially responsible investing. Over the long term, some SRI funds fare pretty well. If more Americans were aware of this, Big Oil might not be so high on investor lists.

Second, it doesn’t take a Harvard Fellow to realize that as the price of a gallon of gasoline continues to climb—to a record $3.60 per gallon, 66 cents higher than one year ago—consumer spending power disintegrates. Many of those wonderful middle-class investment gains are getting sucked into gas tanks all over America.

Guys like Exxon/Mobile chieftain Rex Tillerson can have their big raises; he’ll make $21.7 million 2008. We all know that CEOs make nearly 400 times what the average worker earns. This is America; let them make whatever the market will bear. But just please don’t drip light sweet crude on our heads and tell us it’s raining.

Conflicts Policy

Everything on this blog is the opinion of the authors and does not necessarily represent the views of Peppercom or its clients. Some posts may contain references to businesses or people that Peppercom or its clients work with or have worked with, and in such cases we make an effort to point out those connections in the posts. We also may choose not to write about subjects or events that may relate to or affect Peppercom clients.